CORPORATE GOVERNANCE
DIRECTORS TO
BLAME WHEN
COMPANIES TUMBLE
DOWN
By Felix Owaga Okatch
I
n Kenya, there have been many
tragic corporate failures. Tragic
in the sense that employees
have lost their jobs, livelihood and
pensions/savings. Consider the case
of Nakumatt chain of supermarkets
where salaries are being paid in
arrears and in a staggered way.
Consider also Uchumi which went
through the same injury in recent
past. Innocent employees lost their
jobs due to directors’ gluttony and
negligence. Kenya Airways was
another and many more other
unreported cases in the corporate
arena.
In all these circumstances, the
workers go to work faithfully and
provide their labor but the directors
and top management let them down
big time. In most cases the directors
have abdicated their responsibilities
which include duty of care, fiduciary
responsibility and oversight.
In discussing roles and responsibility
of directors, it is important abinitio
to define the word director. In the
same circumstance also go a step
further and explain its meaning in
the realm of corporate governance.
According to Oxford English
dictionary a director is defined as
a person who directs or controls
something. Is a member of
‘‘ On duty of loyalty, the responsibility of
directors and staff is to be faithful to the
company which they serve. In other words,
directors and staff must give undivided
allegiance to the company when making
decisions affecting the company. Personal
interest should not conflict with company
interest. If they do, then the one of the
company holds.’’
68 MAL 19/17 ISSUE
management board of a commercial
company. A person who directs a
film etc. In corporate governance
circles, a director is seen as a member
of board. He derives his authority
from the board and not in person.
This means that a director as a person
has no authority upon an association
but has authority as a board. But in
terms of liability, a director is jointly
and severally liable.
In other words, director being a
member of board should assist
the board to ensure that corporate
governance framework and strategic
planning are put in place. This is to
ensure good implementation of set
strategic plan.
A director who is a member of board
should ensure that the board acts
on a fully informed basis, in good
faith, with due diligence and care
being taken into account. The board
should apply high ethical standards
and account for interests of all
stakeholders.
The roles of directors take many
forms. In listed companies, various
legislations and statutory guidelines
do come into play. These include